AUKUS Pillar 2 critical pathways: A road map to enabling international collaboration

The AUKUS trilateral partnership presents Australia with an unprecedented opportunity to achieve national-security goals that have eluded it for decades. It could offer access to cutting-edge technologies. It can further integrate Australian, US and UK military forces, allowing more unified action to maintain deterrence against national and transnational actors who threaten the global rules-based order. Perhaps most importantly, AUKUS—in particular its Pillar.2 objectives—is an opportunity for Australia to pursue the long-sought industrial capacity necessary to defend its borders and its interests across a range of probable conflict scenarios.

A vision for Pillar 2 success

AUKUS partner nations implement operational and regulatory frameworks to co-produce, co-field and continuously enhance world-leading national defence capabilities in critical technology areas. Governments will provide leadership and resources to drive effective multinational collaboration among government, industry and academic contributors, leveraging competitive advantages from across the alliance to deliver collective capability.

Whatever the rhetoric, however, the benefits are far from assured. While the effort has had successes, including cooperative artificial intelligence (AI) / autonomy trials and landmark legislation, most of the hard work remains. Strategies and principles are only the beginning. Success or failure will hinge on the translation of those strategies and principles into the regulations, standards and organisational realignments necessary to operationalise the vision. The challenges are significant—from skills and supply to budgets, leadership and bipartisanship. But the benefits from this three-nation enterprise are worth the hard work to sustain political will and financial investment and to combine aspirational ambition with suitable risk tolerance to overcome obstacles.

Past debate has contributed valuable insight into problems that can threaten the full realisation of the AUKUS arrangement including for example, problems like outdated and dysfunctional export-control regulations, struggles with integrating complicated classified information systems and differing regulations and frameworks among the AUKUS partners. Yet, when it comes to fixing those problems, regulators and industry participants often talk past one another. Governments claim that mechanisms are in place to facilitate cooperation. Businesses counter that waiting six months or more for necessary approvals is an unreasonable impediment to innovation. Both sides have a point. So far, reform efforts have been unable to break the logjam.

In this study, ASPI takes a different approach. Rather than wade once more into the morass of trade regulations to identify obstacles and recommend fixes, we interviewed the regulators and businesses that implement and operate under those regulations. Our data collection involved engaging more than 170 organisations as well as key individuals. Our intent here is to provide an operational perspective on practical barriers to cooperation as envisaged under AUKUS—particularly under Pillar 2—and offer the Australian Government detailed and actionable recommendations that we believe would help AUKUS Pillar 2 succeed.

A constant challenge has been policymakers’ lack of understanding of the daily challenges faced by businesses striving to keep Australia, the US and the UK at the forefront of defence innovation. Similarly, myths abound among industry participants about the degree of restrictions imposed by regulations such as the US’s International Traffic in Arms Regulations (ITAR). Officials make the claim that all necessary exemptions exist for AUKUS partners to cooperate, and that only minor adjustments are required to turbocharge transnational innovation. Businesses reply that narrowly tailored exemptions buried in mountains of rules are useful only for the lawyers required to make sense of them. This report aims to bridge that gap.

AUKUS is a generational opportunity for Australia. Its focus on critical Pillar 2 technologies has the potential to bring Australian champions to the world stage and lift the nation’s defence industry up to the state of the art in a range of modern capabilities. Done right, that can help to realise the robust industrial capacity that Australia needs.

ASPI’s Bec Shrimpton testifies before the USCC

On 21 March, ASPI’s Director of Defence Strategy and National Security, Rebecca Shrimpton, testified for the US-China Economic and Security Review Commission’s (USCC) hearing on ‘China’s Evolving Counter Intervention Capabilities and Implications for the United States and Indo-Pacific Allies and Partner’.

The testimony examined the challenges posed by China’s rise and the impact on Australia and the Indo-Pacific region. It also reiterated the need for Western strategists to develop a better understanding of Chinese strategic thinking to effectively counter China. During the testimony, Ms Shrimpton highlighted the concept of “active defence”, which she argued demonstrated that China’s national security strategy extends to pre-emptive offensive operations including the grey zone phase.

With this understanding in mind, the testimony explored China’s military modernisation with respect to its naval, air and space forces. Through PLA activities such as the creation of forward bases in the South China Sea and provision of policing capabilities to Pacific Island countries, China has significantly increased its footprint within the Indo-Pacific region. Outside of the military domain, China has also used political interference and economic coercion to increase its influence in Australia.

As made clear in the 2023 Australian Defence Strategic Review and the 2020 Defence Strategic Update, the challenges posed by China in the Indo-Pacific region show that Australia no longer has ten years, or necessarily any, strategic warning time in the event of a major power conflict. In this context, Ms Shrimpton recommended Australia boost its integrated deterrence and increase burden sharing with its ally, the United States. The importance of cooperating with likeminded partners through minilateral formats such as AUKUS, the Australia-US-Japan trilateral and the Quad was also explored.

The full transcript can be accessed here.

Regional security and Pacific partnerships: Recruiting Pacific Islanders into the Australian Defence Force

The security and stability of the South Pacific and Australia are deeply intertwined. Australian Government policies have for more than a decade consistently prioritised the Pacific for international engagement, including in defence, development and diplomacy. The Australian Government’s ‘Pacific Step-up’, first announced in 2016, delivered a heightened level of effort by Canberra in the region, as did Australia’s strong support for the Pacific Islands Forum’s Boe Declaration. The Albanese government’s increased policy focus on the region, and on a coordinated whole-of-government approach to the Pacific, demonstrates the centrality of our immediate region to the Australian Government’s strategic planning.

Australia’s 2023 Defence Strategic Review (DSR) outlined the need for innovative and bold approaches to recruitment and retention in the Australian Defence Force (ADF), which is seeking to grow by 30% by 2040 but is not yet hitting existing recruitment targets. Budget figures released for 2023 show that ADF personnel numbers dropped by more than 1,300, or more than 2% of the total force. The Budget projections for 2024 to 2026 indicate that the government requires more than 6,000 additional personnel—in addition to replacing those lost through attrition in the next three years—to meet stated growth requirements. In the context of a competitive recruitment environment in Australia, especially for skilled labour, that trend indicates that the Defence organisation will struggle to meet forecast requirements using existing recruitment options and will need to seek alternatives. This challenge of competition for talent and to retain skilled workers is not limited to defence nor Australia. It is an economy wide issue, and global.

As a result, there has been an ‘on-again, off-again’ public debate about whether the Australian Government should consider the recruitment of foreigners into the ADF, with a specific focus on Pacific islanders. Obviously, such an initiative could help the ADF’s recruitment numbers, but, importantly, it could open up economic, skills and training opportunities for Pacific islanders. It could also provide a powerful cultural and practical engagement opportunity for the ADF, while also providing Australia with avenues to help shape the region’s security environment in positive and culturally relevant ways. Such recruitment—especially if it involves bilateral agreements between governments—would also put Pacific Island governments in a unique position to inform Australia’s security assessments and contribute to shared outcomes. Those outcomes could include enhanced regional interoperability, especially for humanitarian assistance and disaster relief (HADR) and supporting combined stability operations, and stronger two-way cultural and social engagement, bolstering familiarity and understanding between the ADF and Pacific Island countries (PICs). There are, of course, arguments against such recruitment. For example, the recruitment of Pacific islanders to fight for Australia could be viewed by some as ‘colonialist’ in a region understandably sensitive to that history. But this concern could be addressed through PICs retaining agency through bilateral arrangements. In addition, any scheme seeking to relocate workers to Australia could be seen as taking skills from a much smaller nation, and risking brain and skills drains. We look at these, and other, considerations in this report.

Below, we identify and assess the key recruitment and retention problems faced by the ADF that foreign recruitment, particularly the recruitment of Pacific islanders, may help to resolve. Our report then delves into various arguments for and against the recruitment of Pacific islanders into the ADF including background information that contextualises the current debate. Ultimately, there are many benefits to opening up pathways for Pacific islanders to serve in the ADF, with the clear caveat that any process to formally establish a program must be culturally and politically sensitive, be informed by detailed risk and impact assessment, and have strong monitoring and evaluation mechanisms in place.

We then explore three options for the recruitment of Pacific islanders:

  1. Direct recruiting from the Pacific region into the ADF
  2. Closer integration and operation between existing Australian and PIC forces
  3. A broader partnership model drawing on lessons from the US’s ‘compacts of free association’ and from the UK’s defence recruitment initiatives.

We analyse key impacts that those options may have, both in the Pacific and for the ADF. The potential policy options offered aren’t exhaustive. However, they are plausible and represent different approaches (which could be combined) to achieve outcomes related to ADF recruitment and retention as well as to improved regional collective security.

A critical consideration in developing these options was a two-way flow of benefit: from the Pacific to Australia and from Australia back to the region. For example, we recommend that, where possible, Pacific recruits receive focused training in HADR, which would help build sovereign PIC capabilities and facilitate the application of learned skills upon recruits’ return to their home countries.

An important part of this research was ensuring that PIC military and security personnel were engaged and could feed into and shape the development of this research report, including the three options put forward for potential recruitment. This occurred in multiple ways. We collected feedback and perspectives through a dedicated roundtable discussion, in a series of interviews and then during the research process to ensure that this report was informed by regional, cultural and local considerations (see details regarding some of that data collection on page 16). The report captures five specific insights from the Pacific island military and security community that are relevant in considering the implementation of any of the three recruitment options.

Finally, we acknowledge that further research is needed to resolve the complexity of some of the policy and legal issues associated with the options suggested. We nominate some specific areas that warrant further investigation.

The trade routes vital to Australia’s economic security

A recurrent theme in Australia’s defence strategy has been our reliance on and need to defend Australia’s trade routes in a globalised world. The vulnerability of Australia’s limited stockpiles of critical goods and its concentrated sources of supply have driven military capability and planning for decades and remain a justification for strategic investments.

The 2023 Defence Strategic Review argued that the danger of any power threatening to invade the Australian continent was remote, but that an adversary could implement military coercion at a distance with threats against our trade and supply routes. With limited resources and finite defence capability, yet vast interests at sea, it’s important that Australian security and economic planning is trained on the most critical pain points in our sea lines of communication. Strategy and planning must derive from up-to-date and accurate data about what we trade, via which routes, and to and from which specific locations.

We also need to understand the factors that contribute to our resilience. They include the depth of supply options, the availability of alternative routes and the sheer strength in numbers which our shipping enjoys when it enters the mighty flow of commerce through the waters of our Asian trading partners. This report explores our trading routes in peace-time. Any conflict would bring sharper focus on what shipping and what trade is truly necessary and on what can be done to secure it. However, the strengths and vulnerabilities of our linkages to the world are evident now and are the focus of this report.

Concerns have been sharpened by the assaults by Houthi militias on commercial shipping through the Bab al-Mandab Strait at the entrance to the Red Sea and the Suez Canal, disrupting the 12% of global trade that passes through those waters.2 In addition, drought has slashed the capacity of the Panama Canal, which in normal seasons handles a further 5% of world trade.

Surprisingly, the course and operation (who is moving what) of Australia’s trade routes has received extraordinarily little analysis. The last significant public paper on the topic was conducted by the Bureau of Transport and Regional Economics (now the Bureau of Infrastructure and Transport Research Economics, BITRE) in 2007 and was based on data from 2001 to 2004. The profile of Australia’s trade has changed radically since then. This report makes five key policy recommendations and the first of these is that the government fund BITRE to update its 2007 study of trade routes so that Defence can make assessments of how best to secure Australia’s trade routes.

A dangerous combination of complacency and tolerance could be born of a view that conflicts are in faraway locations. The reality is that few saw either of the current wars as imminent when they started, and we mustn’t make the same mistake in our region. A central finding in this report is that the greatest risk to the security of our trade routes lies relatively close to home, in the narrow channels through the Indonesian archipelago through which more than half Australia’s maritime trade must pass. Another strong conclusion is that trade has a surprising resilience in the face of conflict: it is important to understand the sources of that strength and develop plans to maximise it.

Deterring an attack on Taiwan: policy options for India and other non-belligerent states

India has a vital role to play in deterring China from unifying Taiwan by military force, a new Australian Strategic Policy Institute report finds, highlighting New Delhi’s significant economic, diplomatic, legal and strategic narrative levers.

The report looks beyond traditional thinking on military preparations to dissuade Beijing from taking the island by force and offers six ways for India, with its great strategic and economic weight, to “help shape Beijing’s calculus away from the use of force”.

The author writes that the use of such long-term measures is vital to New Delhi’s own interests, as the economic and regional security impacts of a major war would be devastating for India itself.  India and other “non-belligerent states” could apply a range of measures to persuade Beijing that the time is not right for a military attack. The aim would be to convince Beijing that “its ducks aren’t quite in a row… so that it defers military action to some uncertain point in the future”.

The report states that China remains deterrable. While it is determined to assume control of the island as a paramount strategic priority, it knows a military invasion would be enormously costly and uncertain.

ASPI’s 2024 Democracy Primer

On 6 February, ASPI held its first public event for the year, the sold-out ‘2024 Democracy Primer’.

Moderated by ASPI’s Council Chair Gai Brodtmann, the panel discussion featuring Professor John Dryzek, Leena Rikkilä Tamang, Chris Zappone and Dr Alex Caples explored the evolving political trends that are set to define this pivotal year.

More than 2 billion people in over 50 countries, representing nearly a third of the global population, are set to engage in elections this year. It will have geopolitical ramifications with so many countries having the chance to choose new leaders, testing the resilience of democracy and the rules-based order in countless ways.

These elections also come at a time of increasing ambition among powerful authoritarian regimes, growing use of misinformation and disinformation often linked to state-led or state-backed influence operations, rising extremism of various political stripes, and the technological disruption of artificial intelligence.

At the same time, democracies face formidable challenges with wars raging in Europe and the Middle East, increasing climate disasters, weakening economies, and the erosion of confidence in liberal societies.

Watch the panel below as they explore the issues that are set to define 2024’s election campaigns, as well as the impact the outcomes could have on alliances, geopolitics and regional security around the world.

Australia can’t talk defence by not mentioning China

Writing in The Australian Financial Review on February 5, my former Australian Strategic Policy Institute colleague Jennifer Parker put forward an excellent argument for granting more leeway to serving Defence personnel to speak out on defence affairs, raising public understanding of threats, and building the social licence for increased defence spending. However, one essential word was missing from her argument: China.

China is the state that poses the greatest danger to Australia and the stability of our region. We will not generate or sustain public consent for increased defence spending and the whole-of-nation effort required in the years ahead until our national security establishment stops publicly treating China as taboo.

To be fair, our women and men in uniform and our Defence and national security officials do not have their heads in the sand about Xi Jinping’s China. ADF personnel literally risk their lives to confront the day-to-day reality of Chinese coercion and brinkmanship, as shown by the PLA’s dangerous use of sonar against divers from HMAS Toowoomba and the release of chaff into the path of an RAAF surveillance aircraft.

The public must tap the military’s experience to build our understanding of Chinese sharp power, especially as it seems grimly inevitable that Beijing’s recklessness will lead to a deadly incident sooner or later, plunging us into a crisis for which the nation is sorely unprepared.

While senior Defence staff should become more visible and vocal in our public debate, Defence must also engage at the grassroots, with our veterans, reservists and regulars at all ranks given opportunities for community engagement. This is even more important as the Commonwealth and state governments work to backfill the military’s role in domestic disaster relief. This is necessary to preserve the ADF for its primary duties of deterrence and preparedness for war, but the trust and compact between the military and the nation must not be inadvertent casualties of these changes.

A good starting place for Defence to be candid about the threat posed by China is the forthcoming national defence strategy (NDS). The published version of the Defence Strategic Review (DSR) that laid the groundwork for the NDS made shrewd observations about China’s growing military capabilities and coercive playbook. But it followed the tendency in our public debate to use abstractions like our deteriorating strategic circumstances. Such abstractions cloud public understanding of the fact it is Beijing’s actions that are threatening our security and destabilising our region, not amorphous concepts like great power rivalry.

Xi Jinping must learn to accept that democracies, unlike the CCP, have a duty to tell their public the truth.

Greater candour about China also needs to extend into closed-door discussions within government. For instance, the classified version of the DSR was probably restricted to senior echelons of need-to-know ministries because it was clear-eyed on China. And while it was encouraging to hear Deputy Prime Minister and Defence Minister Richard Marles tell the ASPI conference last year that the DSR includes the most comprehensive review of mobilisation since the Second World War, it’s telling that none of this was deemed suitable for public consumption. This is not a sound foundation for a genuinely national approach to defence.

Being candid about China is not alarmist. Government openness about the threat posed by Soviet communism underpinned public consent for substantially higher levels of defence spending as a percentage of national income during the Cold War, including during Bob Hawke’s Labor government in the 1980s when Defence estimated that we would have a 10-year warning against non-nuclear attack. Our officials, ministers and allies tell us that we now face greater danger, and that attack could come without warning. Yet, the government dons kid gloves when it comes to publicly acknowledging that China is the primary threat.

Plain language on China would also help apportion the scarce resources of Defence and other parts of the national security ecosystem across a range of threats. The DSR calls for an ADF focused on “the nation’s most significant military risks”. But without clarity about which capabilities are required to counter China, there is a risk that the ADF will lose the scale and flexibility to fulfil other essential roles, as shown recently when ships were not available for collective maritime security operations in the Red Sea.

The main impediment to the government being more open about China is China. Labor’s stabilisation of the bilateral relationship is already being sorely tested, as Australian academic Yang Hengjun’s death sentence reminded us. Beijing would doubtless apply further pressure if the Australian government, including Defence, were honest with the Australian public about the scale and urgency of the threat China poses. But Beijing has shown that it will pressure us regardless, so leaving the nation unprepared is unacceptable.

Australia does not seek an adversarial relationship with China, but Xi Jinping must learn to accept that democracies, unlike the CCP, have a duty to tell their public the truth.

Who controls space will control the Earth – Bec Shrimpton interviewed by the Berlin Pulse

As the space race is on, Bec Shrimpton explains what is there to be gained and what stands to be lost

Körber-Stiftung: The world has many problems, from war and a food crisis to climate change. Why should people care about space?
Bec Shrimpton: It is important to understand what space offers! Many of the Earth’s major challenges can be addressed with space technologies. For example, up in space, the sun shines all the time. Once the infrastructure is established you could get continuous, almost free, reliable energy that could power more than the Earth’s entire requirements.

That sounds great. But it doesn’t help in an acute crisis, right?
It does. One more example: When Russia invaded Ukraine, the US communications company ViaSat was taken down by a massive Russian cyberattack. The Ukrainian government turned to Elon Musk’s Starlink. And Musk’s existing space based internet capabilities allowed Ukrainians to communicate with each other and the world, helping Ukraine defend itself against Russian aggression.

You mentioned Russia. In August 2023, the Russians failed to land a robotic probe on the moon’s south pole. But India succeeded. What is so important about the moon?
On the lunar south pole, there is believed to be one of the largest deposits of frozen water. And there might be a way to extract it. Till now, what has stopped us from going further into space is that we literally run out of fuel. There are no gas stations in space. But if you can access water on the moon, you can theoretically create rocket fuel. That allows the leap to Mars or other asteroids, and it could be the start of a genuine space economy. Up there you have mineral rich asteroids predicted to be worth multiple trillions of dollars.

Many countries have now recognized this potential. What does this mean for the balance of power in space?
Just as on Earth, we’re heading towards a multipolar space order. The United States still has significant military and commercial advantages. But, as in other industries and technological areas, China in particular and other emerging space powers like India are catching up rapidly.

What is China’s role in space?
China has now a huge civil, commercial and military space sector, and its ambitions are largely driven by geopolitics. China wants to command, dominate and to control space. And what holds true for the United States does also for China and India: Who controls space will control the Earth.

Can you give us examples of China’s action in space?
Take technologies to manage space junk, which someone’s got to go and clean up. China has the capacity to do that, and it developed ‘inspector’ satellites and other technologies including robotic arms that can ‘grab’ space junk to remove it. But that also means it can catch US military satellites and potentially exploit or destroy them. China is beginning to produce these kinds of capabilities at a scale and a speed that is worrying actors like the United States.

So why did Australia then scale back its space strategy from 2018, which aimed at fostering its space industry?
The Australian government has dramatically cut the spending for our civil and commercial space program, because it wanted to be fiscally responsible. For me, that was a short term decision that we will regret.

Why?
Because we must make our stamp on the space economy and take our place in the global space race. Of course, investing in spaceports or manufacturing capabilities is expensive. Now there is a window to create the basis for a strong position in the global space economy. But that window will close as others move while Australia stands still. In my view, Australia could have become a space superpower.

What about Germany?
Germany is a considerable space power. It has excellent capabilities in the civil, the commercial and the military sectors, from which we can learn. And Australia can offer Germany access to space and unique collaboration operations, especially in terms of launching. We have wide open spaces, a huge coastline and low air and maritime traffic.

How do you see Germany’s diplomatic role in space?
Very active! We cooperate with Germany in fora like the United Nations to try and establish rules and norms. We collaborate with Germany and France in military space through a Five Eyes Plus grouping led by the United States and it is highly beneficial to all countries. And Germany’s strength is that it can build consensus among those actors.

Australia and Germany both want to maintain a democratic space order. But the world on Earth is not just made up of democracies.
Australia’s wants to see its values and interests protected in space, as they are on Earth. This doesn’t necessarily mean that space should be democratic, but we believe that the liberal democratic principles we have on Earth should extend to space. Current treaties, such as the Outer Space Treaty, are not designed for the increased commercialization and militarization of space. So we need to set new standards for responsible behaviour. And this is an area ripe for greater cooperation between Australia and Germany.

Read more from the Berlin Pulse here.

Fireside chat with Pat Conroy and Bec Shrimpton

On 6 December 2023, Bec Shrimpton, ASPI’s Director of Defence Strategy and National Security participated in AMCHAM’s ‘Meet the Minister: Business Luncheon’ featuring the Hon Pat Conroy MP, Minister for Defence Industry and Minister for International Development and the Pacific.

After the Minister delivered his address at the event, Bec and Minister Conroy sat down for a fireside chat. The discussion covered a diverse range of topics including AUKUS, the upcoming Defence Industry Development Strategy and the role of Australian sovereign industry capability within it, how Australian industry can better access Defence grants and contracts, the improvements needed to achieve greater agility, certainty and performance in defence acquisition, as well as defence innovation. The Minister took a range of questions and also discussed Australia’s unique engagement advantages and responsibilities in the Pacific, including the importance of sports diplomacy.

An Australian maritime strategy: Resourcing the Royal Australian Navy

Australia is a maritime nation. The sheer scale of our sovereign maritime territory and responsibilities, our dependence on maritime trade for our prosperity and the increasing value of activity in the maritime environment must all be recognised in our maritime strategy. In a highly interconnected world, we face fundamental vulnerabilities from the realities of our geostrategic situation. In this report, the author argues that the Royal Australian Navy (RAN) lacks the resources to adequately protect Australia’s vast maritime interests. This concern isn’t unique to our time: maritime strategists have long lamented that, despite being uniquely an island, a continent and a nation, Australia struggles to understand the central importance of a maritime strategy to our defence and security. The underappreciation of Australia’s dependence on the maritime domain and that domain’s significance for the nation’s prosperity and security has consistently produced a RAN that’s overlooked and under-resourced.

In this report, the author examines whether the bipartisan thesis of a structural change in our strategic circumstances, as articulated in the 2023 Defence Strategic Review (DSR), also requires a structural change and an expansion of the RAN. The author argues that both are needed, through both an increased surface-combatant fleet that’s designed on the principle of a balanced fleet and a review of the RAN’s structure. Such a structural review should include consideration of bold changes, including reconsideration of a fleet auxiliary, a coastguard or forward basing of assets to support the workforce requirements of an expanded fleet.

This report looks mainly at the structure of the surface-combatant fleet, noting the recent finalisation of the surface-combatant fleet review. In the light of the Australian Government’s consideration of that review’s recommendations, the report makes eight recommendations for government consideration.

The author also argues that the status quo of 11–12 major surface combatants is insufficient for Australia. That was the case even when the force was structured around the concept of Australia having 10 years warning time of military conflict. That problem has become more acute today, given the new era of strategic competition and the capability and size of our potential adversaries, in particular China, as recognised in the DSR. The report recommends that a major surface-combatant fleet structure of 16–20 ships is needed.